FCA has published a report following its survey of firms providing retail investment advice to inform the Financial Advice Market Review and FCA’s supervisory work. The survey focused on three advice areas in retail investments, namely retirement income, pension accumulation and investments. Feedback is given on a range of topics put to the 233 participating firms, including:

  • data on pension pot sizes and amounts of investable assets of the customers that they have advised for retirement income, pension accumulation and investments;
  • questions about the “standard” advice proposition for different amounts of investable assets, for initial and ongoing advice, and for new and existing customers;
  • firms’ approaches to dealing with insistent customers;
  • challenges that advisers were facing from product providers about providing retirement income advice post-pension freedoms;
  • firms’ advice proposition and use of technology and automation tools; and
  • future plans and expected changes for the provision of financial advice.

FCA’s conclusions included:

  • nearly half of the sample firms’ revenue from regulated advice services was from advice on investments; 21% was from advice on pension accumulation; 16% was from advice on retirement income; and the remainder was from other advice areas;
  • 80% of firms sampled had retail investments advice revenue of less than £1 million in the most recent year; the largest 10 firms all had revenues over £20 million;
  • 18% of the sample said they used pension pot size minimum thresholds when considering whether to take on customers for retirement income advice. £50,000 was the median threshold;
  • for pension accumulation advice, nearly half of firms’ customers were advised on less than £30,000 of investable pension assets, and 30% of customers had less than £10,000;
  • for advice on investments, 57% of firms’ customers were advised on less than £30,000 of investable assets, and 19% of customers had less than £10,000;
  • around half of the respondents had tiered charging structures with different charges for different levels of investable assets. The majority of firms (at least 86%, depending on the advice area and the charging structure) said they did not differentiate between new and existing customers in terms of charging for advice;
  • the charging structures were very similar across the three advice areas. The most commonly used type of charge was a percentage fee, usually between 1% and 4.5% for initial advice on investments. The median percentage fee for ongoing advice on investments was 0.5% for investable assets of £50,000 or less;
  • some firms were willing to go against advice when dealing with customers’ pensions requests, but many were worried about FOS complaints. The majority of firms also noted the importance of provider document clarity;
  • advisers tended to do customer business face to face or by phone, but over half use technology significantly in many stages of the customer journey; and
  • around a third of firms expected to increase their use of platforms and employ more advisers (most larger firms said this), and use more technology, but fewer anticipated growing their mass-market, low-cost advice service – largely because of concerns over their liability and the impact of key FCA rules.

(Source: FCA reports on retail advice market)